Pushing the Hispanic Button

January 2008

Eyebrows rose last November when the U.S. Census Bureau released an analysis of surnames in the United States. Just as the hot-button issue of immigration neared the top of the presidential political debate, the census reported that two Hispanic names, Garcia and Rodriguez, have climbed into the list of the ten most common in the country.

People in the TV business who follow statistics like these were not surprised. According to the census, Hispanics now account for more than 14 percent of the U.S. population, and their numbers are growing far faster than the national average.

Most visibly, this demographic change has informed the political agenda, forcing candidates into delicate positions whereby they condemn illegal immigration while trying not to antagonize the growing block of Hispanic voters.

It has also propelled the rapid growth of Spanish-language television over the past several years, spawning networks and programming services alike that cater to a domestic group conservatively estimated at over 40 million people, which is—coincidentally—about the same number as the entire population of Spain, the source of the Spanish language.

In all, there are now 12.14 million Hispanic TV households in the U.S., according to Doug Darfield, the senior VP of multicultural measurement at The Nielsen Company. In about two-thirds of those homes, “Spanish is spoken as much as or more than English,” he says.

Serving this universe are a plethora of networks, stations and programming services spanning the worlds of broadcast, cable, satellite and—increasingly—new media. According to the media research firm Magna Global, four broadcast networks, about 160 stations and over 70 cable services of varying sizes are targeting U.S. Hispanics.

Univision Communications, the largest of these entities, is now owned by the investment consortium Broadcasting Media Partners, which bought it for $12.3 billion. Since April the company’s CEO has been Joe Uva, whose deep experience on the media side of the advertising business will no doubt prove valuable as Univision seeks to ride the wave of growth in Hispanic advertising that is a natural result of the rise in the purchasing power of this demographic.

Indeed, ad spending on Spanish-language television has been increasing rapidly for several years. According to reports from TNS Media Intelligence, the rate of that increase was a whopping 19 percent on a year-to-year basis in the first three quarters of 2006.

Yet there’s still plenty of room for more growth. TNS says that only 3 percent of total TV ad spending goes to Hispanic tele?vision. If this spending were to reach parity with ad dollars devoted to non-Hispanic tele?vision, it would be 13 percent of the total—a gigantic increase, more than fourfold. While such a huge jump won’t occur overnight, significant growth is predicted. SNL Kagan has forecast that ad spending on Spanish-?language television will climb at an annual rate of 6.5 percent for the next three years, compared to 2.2 percent for all television.

Within this environment of growth, Univision’s major rival, Telemundo, is finding a major opportunity. “The beauty is that we still have tremendous upside in our core business, because Univision has such a substantial share of the audience,” says Don Browne, the president of Telemundo Communications Group. “Clearly, we intend to chip away at that. Plus, the general [Hispanic] population is growing, so we have two sources of growth in our core business, which will be the substantial driver economically for the next four years.?Our digital business is growing dramatically and profitably, as is our cable business, and our international business is booming.”

As the NBC Universal–owned Telemundo seeks to take market share away from its larger rival, smaller niche players are also fighting for their slices of the expanding pie. “We’re looking at taking viewership and market share away from the big boys, from the large Spanish-?language broadcast networks,” says David Sternberg, the executive VP and general manager of Fox Sports en Españ¯¬® “We zero in on them as the ones to poach eyeballs from.”

Fox Sports en Españ¯¬¦amp;#8217;s strategy, says Sternberg, is a simple one: counterprogramming to telenovelas. “It’s a competitive marketplace out there, but as the number one brand in the Hispanic sports space, we can deliver male demographics, which is the hardest demo to reach in Spanish-language television.”

Yet even as this game of niche companies versus the big boys unfolds, new upstarts continue to join the fray. “We can’t do anything about new entrants into the marketplace,” adds Sternberg, referring specifically to ESPN Deportes, ESPN’s entry into Hispanic TV. “They’re going to come in, but they’ll have a harder time getting to the kind of scale we have than we did, because we were there first, which has set up a really strong competitive advantage for us.”

MORE THAN NUMBERS

It’s not just raw numbers, however, that are causing advertisers to gravitate to the Hispanic screen. Many executives in the business say that, as a rule, U.S. viewers of Hispanic television are more loyal to the brands advertised on their screens than U.S. viewers of English-language TV are.

“We know from research that was conducted by Simmons in early 2007 that viewers of Spanish-language tele?vision are three times more likely to make a purchase decision based on advertising in Spanish than non-?Hispanic viewers of English-language television are,” says Univision’s Uva. “Hispanics feel that those advertisers who speak to them in Spanish respect them and understand them. It is vitally important for any marketer looking for sustainable growth to understand this and to act on it.”

U.S. Hispanic purchasing power continues to surge. According to the HispanTelligence unit of Hispanic?Business.com, it is growing at three times the overall national rate, moving from about $700 billion in 2004 to a projected $1 trillion in 2010.

With numbers like that, it’s small wonder that advertisers and agencies alike have become more receptive to the idea of reaching Hispanic consumers directly. “When I started doing this, nine years ago, we had only 12 national advertisers,” says Tom Maney, the senior VP of advertising sales for Fox Sports en Españ¯¬® “Today, as we’ve grown our distribution and added programming, we have almost 90 on board. Advertisers now recognize cable as a medium for reaching Hispanic viewers, and our sales are growing at 15 percent a year.”

However, there is still work to do. Hispanic advertising in the U.S. is not growing “as fast as it should if we take into consideration demographics and purchasing power,” says Luis Villanueva, the president and CEO of Venevision International, a member of the Cisneros Group of Companies and the world’s largest Spanish-language film distributor and producer. “There have been some high-profile negotiations in Hispanic media [and] there is the expectation that both the growth and closing of the gap versus the general market will come sooner rather than later.”

Lino Garcia, the general manager of ESPN Deportes, points out that “certain categories still have not opened up to the market as aggressively as they should. Consumer products have good representation [on Hispanic tele?vision], but categories like financial and pharmaceutical haven’t stepped up as much as they should. So there are still opportunities for all of us to open up and keep growing the pie.”

That being said, selling advertising on Hispanic television “is much easier today than it was five years ago,” according to Christopher Crommett, the senior VP of CNN en Españ¯¬® “There’s a consistent increase in awareness of the potential of the market. We’re still fighting for our piece of the pie, but there’s very little arguing today that you need to reach the Hispanic audience.”

“Hispanics are not only the fastest-growing population segment in numbers, they also represent the fastest-growing in terms of purchasing power,” says Univision’s Uva. “That means that every dollar spent against them is a dollar spent on growth, not on defending sales against those non-Hispanic segments of the population whose numbers are declining as a percentage of the whole and whose buying power represents less than it did in the past.”

THE RIGHT PROGRAMMING

Just as the Hispanic population’s deepening pockets offer new opportunities to advertisers, they also pre?sent a new market for subscription services. Venezuela’s Venevision International, which has entered the U.S. market mainly through programming, supplies its VeneMovies pay-TV service to broadcasters and cable networks alike.

“This is a very successful channel that shows the best of modern, contemporary, originally-produced-?in-Spanish films, the best of the new cinema in Spanish,” says Villanueva. “It is packaged specifically for the U.S. Hispanic market both in its marketing and promotional strategy and in its product diversity and [is targeted] at all the main nationalities that compose the U.S. Hispanic market.” In just one year, says Villanueva, VeneMovies has grown to over a million subscribers and covers all distribution windows, including PPV, VOD, home video and the Internet.

In acknowledging the multiple nationalities that form the U.S. Hispanic population, Villanueva highlights the fact that Spanish-speaking Americans are by no means a monolithic group. In California and Texas, Mexican-Americans predominate. In New York and other parts of the Northeast, most Spanish speakers are Puerto Ricans or Dominicans. In Florida, their ancestry is Cuban. And in many places there are large pockets of immigrants from Central America and from Colombia, Ecuador and other South American countries.

Hispanic television, which at one time had a decidedly Mexican flavor, has evolved to serve this multiplicity of cultures. One of the newest services is CaribeVisión, which launched in September and targets Spanish-speaking viewers of Caribbean origin—including Puerto Ricans, Colombians, Cubans and even Venezuelans.

CaribeVisión expects to find a niche unfilled by giants like Univision and Telemundo. “We have programming totally different to what the other Spanish-language networks show,” says Carlos Barba, the channel’s CEO. “We have telenovelas from Brazil, different-style novelas from Mexico, product from Argentina and cameras on the street in Puerto Rico, New York and Miami that let people send video messages to friends and family living elsewhere.”

Barba stresses CaribeVisión’s populist and personal approach to its viewers: “We recognize people that no one else recognizes,” he says. “We send big stars to the homes of poor people to have dinner with them. They’re the people who come to the U.S. with nothing and work hard, become professionals. We touch their hearts.”

CaribeVisión now reaches about 7 million viewers, mostly on the East Coast, through a combination of owned stations and cable systems. It expects to expand to other parts of the country. “We’re looking to grow to Chicago, Atlanta, Texas and California,” says Barba. He adds that the network has already invested $60 million, including money spent on the purchase of television stations in New York, Miami and Puerto Rico.

Azteca America, a network whose very name harks back to the Mexican culture of its owner, TV Azteca, recently broadened its programming mix beyond its roots to reflect the increasing diversity of Hispanic culture in the U.S. Harry Abraham-Castillo, Azteca America’s new executive VP of programming, says his first order of business was to take the network’s program grid and “mix it around” in response to viewers’ evolving tastes. “Our viewers in the U.S. are a multicultural mix, and are not necessarily just from Mexico, where our production center is based,” he says.

Abraham-Castillo sees TV Azteca’s vast program library and prolific ongoing production output as assets upon which to build a far more diverse program lineup. “With that programming as our base, we fill in with what is most attractive to the realities of Hispanic families that reside in the U.S.,” he says. “Like the FOXes and NBCs of this world, we wanted to access a big pool of independent producers, so ideas are generated not only in-house but also by the independent production community.”

To achieve that goal, Abraham-Castillo had to shake things up. “It was a difficult argument to make, going to Mexico and telling our parent company, ‘Look, in the U.S. we’re going to have the majority of our programming from TV Azteca, but at the same time we need to be able to produce content in the U.S. and to be able to localize some programming and be sensitive to our communities.’ And that’s what we have done.”

Azteca America has revamped its prime-time schedule and launched several original programs in the past few months. “All of a sudden you have Azteca America programming that is a mixture of TV Azteca programming and acquired shows that have the ingredients to appeal to U.S. audiences,” says Abraham-Castillo. “We have greenlighted productions produced in the U.S. by Azteca America. We have a new 8 p.m. checkerboard and it’s working sensationally.”

Discovery en Español for its part, has connected with its audience by showing programs that touch on an issue close to the hearts and minds of the Hispanic audience: immigration.

“We have shows that are very relevant to our target audience,” says Luis Silberwasser, the senior VP and general manager of Discovery Networks U.S. Hispanic Group. “We did two shows on the topic of immigration, going behind the scenes to look at immigration issues between Mexico and the U.S., following a group of people and the challenges facing them.”

One of these shows, Objectivo: El Norte, is investigative in nature and interviews people on both sides of the issue. The other, Viviendo en las sombras, deals with the hardships faced by undocumented Hispanics living in the U.S.

In addition to its main channel, Discovery en Espanol recently launched a second cable and DTH service—Discovery Familia—which is oriented toward women and children. The two-channel portfolio allows Discovery to capture a larger range of Hispanic households.

BILINGUAL GENERATION

Even as it grows and prospers, Spanish-?language television in the U.S. is facing the challenge of change within the very demographic group that it serves. Whereas in the past immigration was largely responsible for the rise of the Hispanic population in the U.S., today people born in the U.S. account for about 60 percent of that rise, according to Yankelovich, a consumer research company. And this newer generation, more acculturated to the U.S. than its elders, tends to speak English as much as, if not more than, Spanish.

Today, most U.S. Hispanics are bilingual—almost 55 percent, according to the census—and they consume media in both English and Spanish. The 2002 National Survey of Latinos by the Pew Hispanic Center found that 46 percent of second-generation and 78 percent of third-generation adult Hispanics speak mostly English.

One network—Sí TV, which launched in 2004—targets English-speaking Hispanics by programming Hispanic-oriented content entirely in the English language. The mun2 cable network, an offshoot of NBC Universal’s Telemundo, also targets the English-dominant Hispanic audience with “Spanglish” programming—a combination of Spanish and English that is both street language and an “in” way of communicating among hip Hispanics.

“It’s not just about language, it is about culture,” says Telemundo’s Browne. “Hispanics want to see television that is culturally relevant to their lives. We are doing this on the broadcast side and we are doing it on the cable side. [Our channel] mun2 is designed specifically to appeal to bicultural, bilingual audiences, which happens to be the 12-to-34 audience—the fastest-growing component within the Hispanic population.”

Browne adds that talented independent producers are drawn by the opportunity to create programs for this group. “This business model sort of feeds on itself in the sense that you keep attracting the creative community because they are excited about the content,” he says.

Not that there’s any danger that the entire Hispanic population will suddenly switch to English. “The Hispanic market is large enough and both its Spanish-speaking and English-speaking segments are growing,” notes ESPN Deportes’ Garcia. “We broadcast in Spanish and our primary target is Spanish-dominant, but our programming philosophy is based on content driving the viewer rather than the language. Here’s a case in point: if you have a Dominican teenager who is English-dominant but loves baseball, he’ll watch Dominican baseball on ESPN Deportes in Spanish. A network like ours has programming that’s not just about dialogue but about sports that you’re passionate about.”

CaribeVisión’s dealing with the bilingual issue by adding English subtitles to its telenovelas. “We get a bigger audience that way,” explains CaribeVisión’s Barba.

At Azteca America, one of the young-skewing shows on its new prime-time checkerboard—Thursday’s Fugitivos de la ley (Fugitives from the Law), which is shot on the streets of Los Angeles—has a dialogue that is “70 percent in Spanish and 30 percent in English,” says Abraham-Castillo. “We need to reflect the reality of the audiences in our community.”

And while all the broadcasters and cable services targeting the His?panic community in the U.S. are confident that they will continue to use the Spanish language for the foreseeable future, they are leaving all options open. “There’s not going to be any tectonic demographic change in the next five years,” says Crommett of CNN en Españ¯¬® “But we’re cognizant that over the coming years the number of Hispanics who will prefer to consume media in English will grow. We have to be able to service them in English as well as the others in Spanish.”

NEW MEDIA

The gap between Hispanic-Americans and the general population in computer ownership, connectivity and mobile-phone penetration “is closing, and there is an increasing interest in these markets,” says Venevision’s Villanueva. “We in Venevision International are ready to satisfy the needs of these platforms. We are distributing films and music on the Internet, participating in the wireless-entertainment market with our companies LatCel and Venemobile, and have even produced telenovelas for the cellular market. We already have a significant catalogue of product for downloads in every category: ringtones, wallpapers, video clips and subscription services.”

The mobile-video market appears to be an area especially ripe for growth. “The Hispanic population over-indexes on use of mobile telephones,” says Garcia. “They tend to use mobile phones as their primary phones, so there’s really a tremendous potential in the wireless space, and we’re looking to tap into that on both the Sprint and the Verizon platforms with news, listings, scores and other applications.

“We operate across five platforms in all,” he adds. “TV is the primary driver of the ESPN brand, and the same is true for ESPN Deportes. We also have ESPN Deportes Radio, ESPNDeportes.com and ESPN Deportes La Revista, our magazine.”

“Broadband and mobile are the fastest-growing piece of the pie,” says CNN’s Crommett. “We have an agreement with Yahoo! to provide them with video clips of material that goes on their Spanish-language video player. We have another agreement with Verizon.”

All signs point to continued growth for Hispanic TV in the U.S. “I’ve been doing this since the ’80s, and I can tell you this,” says Darfield of Nielsen. “In the period between 1980 and 1990, and in the period between 1990 and 2000, the census department said that Hispanics were growing five times faster than the overall population. But when the overall census data came out, both times it turned out that it was actually growing eight times faster. So if you’re a betting man, it’s always better…betting the over than the under.

“Now, as we await a new census in 2010, nobody has a clue as to what’s going on out there,” Darfield continues. “You get projections, then you get the actual census numbers and someone says, ‘Oh my gosh.’ In the inter-census period we do a good job of understanding what’s happening in New York, L.A., Chicago and Texas—places where there were lots of Hispanics at the time of the last census. But we always end up getting surprised when the census comes out showing large numbers of Hispanics living in the Carolinas, for instance—people you didn’t know were there because they weren’t there in the last census.”

“Hispanics will definitely change the U.S. demographic profile substantially,” says Villanueva. “From 1990 to 2012 the expected increase is 123 percent, getting around the 55 million mark, with an average household of 3.4 persons versus 2.4 in the general market.” Villanueva estimates that U.S. Hispanic purchasing power in 2012 will reach $1.3 trillion. “Who would not want to be present in this opportunity?” he adds. “That is the reason why we are preparing to serve this audience in all their entertainment needs.”

“Growth is pretty fantastic,” agrees Garcia of ESPN Deportes. “Every time there’s been a census projection, the actual numbers have come in higher. It’s amazing compared to what it was ten years ago. Advertisers in this market continue to expand their budgets.”

“We joke and say that the U.S. is our emerging market,” says CNN’s Crommett. “We launched in 1997 and Latin America is now a relatively mature market for us. We’re in 19 million homes there, and only in 4.3 million homes in the U.S. There’s lots of room for growth here.”